Adam Neumann on WeWork's Rise, Fall, and His Personal Evolution

Rebecca Neumann challenged his focus on material success when they were dating.

She told him that he was very focused on material things and not understanding the game of life.

Neumann started a spiritual practice, beginning with Kabbalah, to explore the pursuit of true happiness and fulfillment.

Adam Neumann states that material wealth does not provide genuine happiness or fulfillment.

He defines success by the love one has cultivated and the love that surrounds them at the final moment of life.

He notes that in spiritual study, 'hell' is described as the gap between the ultimate potential of one's soul and what one actually achieved.

Neumann and his partners sold Green Desk for $1.5 million, receiving installment payments.

The landlord for the first WeWork location required a check of exactly $300,000.

That same $300,000, which was sitting in Miguel's account, was used to secure the building.

Following the WeWork crisis, Neumann went from 13,000 employees to three in one week.

He noted the ironic situation where many long-time friends distanced themselves, while newer colleagues remained loyal during the dire period.

These three remaining individuals, who had joined him only three months prior, became partners in his family office despite the severe financial challenges, including a negative 400 million compounding interest situation.

Neumann attributes his ability to maintain a positive outlook during this period to his belief that the darkest moment of the night is a second before dawn.

Adam Neumann notes that his level of certainty regarding WeWork's necessity in the world was very high.

He contrasts his early days at WeWork, when he had no children and worked 18 to 20-hour days, with his later ventures.

He mentions that many founders experience what pop culture calls imposter syndrome, where they doubt themselves while pursuing something great.

Stephen Bartlett defines a 'paper wall' as something that looks solid but reveals itself to be completely made of paper, which can be challenged by asking 'why'.

He provides an example where a team member, who took 9 days to animate a 30-minute video, reduced the task to 2 days by simply requesting a new laptop after being asked 'why' the process was so long.

Neumann suggests that fostering internal growth and addressing personal insecurities within a team can unlock significant collective potential.

He highlights that businesses often crash if they grow faster than their founder's personal development, leading to unfulfilled leadership.

Adam Neumann advises entrepreneurs to look at the history of potential investors.

He mentions instances where founders like Travis Kalanick of Uber and Jack Dorsey of Square and Twitter faced conflict with investors.

He emphasizes that choosing the right investors, employees, and partners is of great importance.

Neumann explains that WeWork's business model involved a 'ramp-up' period where new locations initially incurred losses, typically within 6 to 9 months, extending to 12 to 18 months at its peak.

The high-growth strategy often resulted in a negative P&L because the rapid expansion of new sites outpaced the profitability of existing ones.

He asserts that to achieve overall profitability in such a model, the company needed to stop growing and allow existing demand to catch up with the supply.

In 2016, WeWork was generating approximately 950 million in revenue and consistently doubled its revenue each year.

The meeting with Masayoshi Son of SoftBank, initially scheduled for 90 minutes, was cut down to a brief 12 minutes in the office, culminating in a 16-minute car ride where the deal was discussed.

Neumann had originally planned to raise a modest $300 to $400 million for WeWork, a figure that was dramatically dwarfed by Son's proposal.

Masayoshi Son unexpectedly offered to invest $3 billion, a figure that quickly escalated to $4.2 Billion to cover WeWork's global entities, including operations in China, Japan, and Southeast Asia.

The significant investment deal was sealed informally with handwritten signatures on an iPad within the vehicle, marking a pivotal moment in WeWork's trajectory.

Neumann emphasizes the importance of pausing to reflect on 'why' and one's true intentions when faced with such large, unsolicited offers, noting that while he doesn't blame the investor, accepting such a substantial sum profoundly impacted the business.

Neumann attributes his departure from a mission-driven focus to the influx of capital, which blinded him with financial targets and encouraged a dangerous level of unchecked ego.

He described this as a dangerous period where his 'big ego' became synonymous with 'big desire' but lacked the necessary management and control.

This change in focus led to making bad decisions during a high-growth phase, with the company needing to make 100 decisions daily and a drop from 98% to 90-95% correct decisions amplifying errors.

Neumann contrasted this with advice he received from Salesforce founder Marc Benioff, who urged him to take WeWork public at a lower valuation to learn how to be a public CEO, an advice Neumann regrets not following.

He explained that addressing one issue at a time reveals the next area for development, leading to continuous self-improvement.

Neumann emphasized that aligning one's inner calling with the drive to be a founder is crucial for achieving sustainable success in business and life.

He noted that while building a business is an art, a strong foundation as both a human being and a businessperson is essential, rather than blindly following investor advice on sequential steps.

Adam Neumann highlighted that receiving substantial capital, like the $7 million investment in 48% of Wave Garden, brought both opportunities and hidden distractions that could divert a founder’s focus from their core mission.

He noted that even objectively good ideas, such as Wave Garden’s potential to generate over $500 million in sales by 2027, can become distractions if they don't align perfectly with the company's central purpose.

Neumann advised founders to choose partners who genuinely support their mission and vision, not merely their growth aspirations, and to assess potential collaborators based on how they would act during difficult periods.

He stressed that uncontrolled growth in a business, faster than a founder's ability to handle it across ego, finances, and relationships, will inevitably lead to a breakdown, necessitating readiness and proper alignment before scaling up.

He suggested putting phones away in a 'cookie jar' for a full day, describing the initial urge to check the device as a clear indicator of addiction.

Neumann claimed that after this digital detox, individuals experience heightened clarity and often generate their best ideas, leading to improved decision-making about business and personal relationships.

He further explained that this practice allows individuals to realign their priorities, analogous to how fasting can clear the mind, and challenged the notion that such a break offers no upside, equating it to an addict's resistance to stopping drug use.

Masa Son envisioned a trillion-dollar entity, driving WeWork to double its revenue through aggressive expansion at the cost of $2 billion in annual losses.

WeWork successfully met Masa Son's ambitious targets, doubling its revenue from $960 million to $1.8 billion or $1.92 billion in subsequent years.

Neumann confirmed that Masa Son was unconcerned with WeWork's annual losses, which were around $2 billion at the time, believing that profitability would catch up once growth stabilized.

In March 2018, Masa Son offered to buy WeWork for $20 billion in cash, proposing to give $10 billion to existing investors and inject another $10 billion into the company's balance sheet, and offering Neumann and his management team a path to regain majority control if they met agreed-upon goals.

Board members, particularly from Benchmark and another unnamed firm, engaged in months of negotiations from March to October 2018, rejecting Masa Son's firm offer to push for a higher valuation.

Despite WeWork losing approximately $2 billion annually at the time, these board members, who had already pulled out between $350 million and $700 million from an initial $21 million investment, aimed for a $32 billion valuation.

Neumann characterized the board's decision-making as driven by greed, which ultimately caused them to lose the opportunity, especially as the stock market began to decline by late September/early October.

The deal's documents were finalized on December 24, 2018, by which point SoftBank's stock had significantly fallen due to external factors, making the original offer no longer viable.

The letter threatened to seize his shares, which held 5-to-1 super voting rights, effectively giving the banks control over WeWork.

Neumann described this tactic as a common 'old school' venture capital playbook, designed to destabilize founders during critical transitions.

He detailed how Masa Son ultimately stepped in to save the company, paying off the $460 million debt to all banks, and in return, Neumann relinquished his control of WeWork to SoftBank.

This composed reaction provided Neumann with a critical emotional foundation, allowing him to stop crying and realize he had a stable support system, which he identified as a turning point in his emotional maturity.

Neumann underscored the importance of selecting a life partner who offers unwavering support and stability during the darkest days, rather than just during periods of success, contrasting it with the perceived greed of some business partners.

He recounted telling his employees, who were surprised by his post-crisis smile, that 'the darkest moment of the night is a second before dawn,' bolstered by his wife's belief in him.

Adam Neumann recounted that SoftBank had initially agreed to pay $3 Billion to him and other investors on April 1, 2020.

However, on the last day of March 2020, as the COVID-19 pandemic intensified, SoftBank invoked 'force majeure,' a clause typically used for unforeseen events, to legally cancel the payment.

Neumann described this moment as a profound test of resilience, choosing to view the setback as a lesson to be learned rather than a defeat, which led to a complicated litigation.

His wife, Rebecca, rejected a subsequent settlement of $1.5 billion, demanding immediate payment before a scheduled C-section, which ultimately forced SoftBank to comply, demonstrating her resolve in a critical moment.

Adam Neumann articulated five lessons he felt were learned during the discussion. The first is to choose your life partner, friends, and business partners for the worst day in your life, not for the best.

Secondly, he noted that life is not about when we fall down, but about how we get up. His third lesson is to choose the life partner that will make you the best version of yourself, the one that you need, not the one that you think you want.

Fourth, he stated that control doesn't come from power, but from influence, which needs to be earned every single day. Lastly, he mentioned that we all have a destiny and a journey, and urged individuals to get to know themselves so they can start living theirs.